CDL 1000: the start-up that thrived through the Covid logjam
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Digitising sections of the US logistics industry that still do business on paper has helped CDL 1000 top this year’s ranking of the fastest growing American companies.
Since being founded in 2018 by Andrew Sobko, Chicago-based CDL has grown rapidly by applying technology to arcane processes or thorny problems in the industry.
“Ports in the US are very complicated, they’re still 40 years behind on infrastructure and everything else,” says Sobko. “We’re digitising the logistics space and the most complicated part of the supply chain: logistics out of US ports and rail yards. We deliver a DoorDash-like experience to customers and to trucking companies.”
The company’s revenues went from $116,000 in its founding year to $64.3mn in 2021, equivalent to a compound annual growth rate of 722 per cent. That rapid growth came at a time when Covid caused an array of severe problems in the logistics industry, as high demand collided with disruption from rolling lockdowns. Factory closures, driver shortages and sharply higher shipping costs were among the factors that led to delayed vessels and gummed-up ports and warehouses.
Enter CDL, which started out with drayage — the process of transporting goods from a port to a company’s warehouse. This is complicated because of what Sobko says are “six touchpoints” that can cost time or money if any are missed.
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A trucking company needs to schedule an appointment with a port to take a shipping container. It needs to arrive with the right chassis to carry the container and with any “demurrage” or late fees paid, otherwise the container stays put for several days until another appointment is made. After the container has been extracted, taken to a warehouse and emptied, it then needs to be returned to the shipping line within two days — otherwise, there are late fees to be paid and these can stretch to thousands of dollars, says Sobko.
“Historically, drayage was controlled by locally-based asset-based trucking companies,” he explains. “And all of them were operating on paper. They have paper on the walls, managing containers. They were making a lot of money, that’s how the industry operated for 40 years. We came in as a disrupter.”
CDL started offering to pay the demurrage fees for customers — with systems in place to pay the fees instantly and thus avoid delays — before passing on the bill with a 5 per cent charge. It also offered to cover all of a company’s demurrage fees out of a given port if it was given all of a company’s business there.
“That part of our business has blown up, in a good way,” Sobko says. “In reality, you have to pay those fees urgently . . . so we pay on behalf of Fortune 500 companies with our own balance sheet, our own credit card . . . it’s like a Fintech platform, we centralise the payments, audit them, dispute some of them.”
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CDL then expanded into trucking, devising algorithms to price and schedule large numbers of shipments, and an easy-to-use “DoorDash-like” interface for customers. “We give them full visibility [with] real-time tracking, which is not common in the trucking industry,” he says. A large US retailer might need to arrange shipments between thousands of pairs of locations. Pricing this might take a week by hand, but just a few minutes if automated, Sobko notes.
As for the trucking companies, the pitch to them is more consistent work. Referring to one customer, “sometimes, they need to move 100 trucks, today, out of Chicago to Atlanta, and with one click they can take it as one transaction. All of the old-school brokerage firms, they sell shipments as individual transactions [but] we sell them in volumes as one transaction”, he says.
The logistical problems caused by Covid have eased, but CDL says it is still signing up several large companies every week. “We might be charging a premium for it, but we have solutions for all of the big problems in Covid,” says Sobko. “The worse it gets, the better it is for us.”
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Originally posted on: https://www.ft.com/content/204c6ea3-1a1e-4403-a737-51fcf99e5356